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ASX steadies after Wall Street has worst day since 2022
By Sumeyya Ilanbey
Welcome to your five-minute recap of the trading day.
The numbers
The Australian sharemarket steadied after its worst two-day sell-off since the coronavirus pandemic and rose modestly, as the Reserve Bank of Australia held the cash rate steady at 4.35 per cent but warned the economy remained overheated.
Wall Street has kicked off its week with more heavy losses.Credit: Bloomberg
The S&P/ASX 200 added 31 points, or 0.4 per cent, to 7680.6 at the close, with only four out of 11 sectors trading in the red. Consumer discretionary stocks (up 1.6 per cent) was the best performing sector, while energy (down 1.99 per cent) recorded the sharpest losses.
The modest rise comes after the ASX plunged 3.7 per cent on Monday, its worst day since 2020, racking up than $130 billion of losses in two sessions.
The lifters
Wesfarmers (up 2.3 per cent), Aristocrat Leisure (up 2.5 per cent), JB Hi-Fi (up 1.8 per cent) and Harvey Norman (up 1.1 per cent) all rose, helping buoy the consumer discretionary sector.
Mercury NZ was the best performing large-cap stock after its shares climbed 3.7 per cent, followed by Aristocrat Leisure, Wesfarmers and the Commonwealth Bank (up 2.2 per cent).
Treasury Wine Estates advanced 1 per cent after saying it will sell its struggling commercial wine unit, which houses brands such as Yellowglen and Wolf Blass, to focus on its premium brands such as Penfolds. The move will incur a $290 million writedown in its full-year results.
The laggards
Pro Medicus plunged 6 per cent, recording the sharpest drop among large-cap stocks, followed by Woodside (down 5.1 per cent) and Newmont (down 3.4 per cent).
The energy sector, which has plunged more than 20 per cent in a year, was the weakest on the local bourse on Tuesday, as global economic uncertainty continues to dampen demand and supply of oil. Brent crude tumbled 3.4 per cent over the week and is trading at about $US76 a barrel, down from about $US85 a month ago.
Investors briefly rallied after the Reserve Bank handed down its decision at 2.30pm, but soon after pulled back as governor Michelle Bullock said interest rate cuts in the next six months were “not in the agenda” and the market’s expectations for cuts were “a little bit ahead of themselves”.
The lowdown
AMP chief economist Shane Oliver said Bullock’s comments continued to lean hawkish, but he believed the cash rate had peaked.
“Our assessment remains that the RBA’s cash rate has peaked, and we see five reasons why the next move in rates will likely be down: monetary policy remains restrictive; the full impact of past rate hikes is still feeding through; recession risks are high as indicated by the ongoing slump in real household spending per capita and slowing population growth which will add to the risk; forward-looking jobs indicators warn of a significant further rise in unemployment ahead; and wages growth has peaked, which will slow underlying services inflation,” Oliver said.
Capital senior financial market analyst Kyle Rodda said although relative calm returned to the ASX on Tuesday, it was unclear whether it was because “the tempest has passed or we are merely in the eye of the storm”.
On Wall Street overnight, the S&P 500 lost 3 per cent, its worst drop since 2022. The Dow Jones fell by 1084 points, or 2.7 per cent, and the Nasdaq Composite crumbled by 3.7 per cent.
The drops were just the latest in a global sell-off that began last week. Japan’s Nikkei 225 plunged 12.4 per cent on Monday for its worst day since the Black Monday crash of 1987.
It was the first chance for traders in Tokyo to react to Friday’s report showing US employers slowed their hiring last month by much more than economists expected. That was the latest piece of data on the US economy to come in weaker than expected, and it’s all raised fear the Federal Reserve has pressed the brakes on the US economy by too much for too long through high interest rates in hopes of stifling inflation.
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